Know More About Make In India

July 24, 2016March 7, 2017 by Vastav Khound

The Make In India program was launched by Government Of India in September 2014. It aims to give fillip to the manufacturing sector and envisages making India a manufacturing hub in the coming years. The core idea of the program is to encourage national and international companies to erect manufacturing units/industries in the country. The manufacturing sector contributes around 17% to the overall GDP (Gross Domestic Product) of our country, which remained stagnant for 4-5 years consecutively, and this initiative aims to increase it to 25% by 2022. Manufacturing sector is labour intensive, so the program also endeavors to address the acute unemployment problem of the country by aiming to create 100 million direct jobs and many indirect jobs by 2022. Also, it focuses to reduce imports and increase exports, substantially. To make it a reality, the principal objective of the Government has been to create a conducive environment for doing business in India and reach top 50 in the World Bank’s Ease Of Doing Business rankings. Several policies have been unveiled, reforms have been undertaken and incentives have been announced to facilitate a better business climate. Many more reforms are formulated but are yet to materialize.

The Indian economy was opened for the first time in 1991. Since then the process of liberalization continued and many sectors were opened up for FDI (Foreign Direct Investment). Under the Make In India initiative, 25 sectors, like defense, civil aviation, railways, food processing etc. have been opened up, some partially and some completely. Initially, sectors like defense and railways were opened up to 49% and 100% respectively for FDI. Later, defense, civil aviation, food processing were completely opened up. Many other schemes of the Government are also linked to Make In India . Skill India ; to developing a skilled workforce of 400 million by 2022 to provide investors skilled labors with high productivity. Digital India ; to connect 2.5 lakh rural villages through optical fibre network to provide internet connectivity of high speed in rural India and increase manufacturing of electronic items in India. This will require heavy investment. Numerous other policies have also been rolled out to enable a business friendly environment in India. The latest of them was the Textile Policy. It provides incentives like enhancing duty drawbacks to boost exports and flexibility in labor laws to increase productivity of labour and draw an investment of US$11 billion. The introduction civil aviation policy abolishes 5/20 rule for international operations and incentivizes the operation of flights between tier-II cities and tier-III cities. These steps are to encourage FDI.

To build Delhi-Mumbai industrial corridor, Mumbai-Bengaluru Economic corridor, Chennai-Bengaulru Industrial Corridor Project, Vizag-Chennai Industrial Corridor and Amritsar-Kolkata Industrial Corridor, FDI compounded with domestic investments are needed. The making of 100 smart cities and running bullet trains and semi high speed trains require huge investments in manufacturing sector. These are well planned projects to attract investments. Several administrative reforms have been undertaken to expedite the process of giving permits, awarding licenses and approval of patents. Self certification was introduced to counter the inspector raj image of India. Electronic tax grievance redressal systems called e-nivaran was launched to fast track the redressal mechanism and ensure early resolution of the disputes of the taxpayer. The Bankruptcy and Insolvency code law, which was passed in the parliament, will make it easier to wind up falling businesses and recover debts and the announcement of new IPR (Intellectual Property Rights) policy will further facilitate ease of doing business. Some reforms have been formulated but await enactment, like the GST (Goods and Services Tax) bill which amalgamates different indirect taxes of all states. All these administrative reforms, tax reforms and banking reforms and policy changes are to streamline and reorient the system.

The program started to gain momentum last FY (Fiscal Year) of 2015-16. India overtook China to become the world’s top FDI destination, a position held by China for many years. India received US$ 40 million FDI equities which is 29% higher than last FY of 2014-15. Highest FDI came from Singapore (US$ 13.69 billion), followed by Mauritius (US$ 8.35 billion), USA (US$ 4.19 billion), Netherlands (US$ 2.64 billion) and Japan (US$ 2.61 billion). Total FDI equity inflow in 2015 was US$ 63 billion, highest for any country. The large amount of investment that has flown in has made an impact but not very substantial. Though FDI has come, it is still to pick up in the manufacturing sector. Most of the investments have come in the services sector, which too is needed, but the investments in manufacturing sector are below expectations. The primary perceivable reasons behind this are poor infrastructure and lack of skilled workers. Poor growth of MSMEs (Micro Small and Medium Enterprises), which provides employment to a large chunk of population, has had a spiraling impact on the incomes of its workers, which has led to a decrease in purchasing power of the workers, could be another cause. Domestic private investment didn t pick up and that also contributed to less investment in manufacturing sector. The overstretching of the domestic private sectors in previous years has affected its ability to invest. The weakening of rural economy due to low agricultural productivity has also played a part in it.

The increase in NPAs (Non Performing Assets) of the banks has declined its lending power and in turn it has impacted investment. Enough investment has flown in but the challenge ahead is of reviving the domestic private sector and increase investment of domestic investors, strengthening the banks for easier recovery of debts and decrease its NPAs, pump in more money to the core manufacturing sectors as public investment to improve the infrastructure and are doubling our efforts to revive the rural economy which was reeling under severe drought for last two years. A serious and a committed effort on the part of the Government is needed to make its program of Make in India a success and taking the scale manufacturing in the country to an all time high. The real challenge will be to continue with the agenda of reforms and give a parallel push to the economic revival, especially in the rural sector. Crossing China in FDI shouldn’t be the yardstick and adopting a complacent attitude will end up being a damb squib. Certain reforms like the GST are languishing in papers due to politics of the political parties. The Land Acquisition Bill also could not become a reality as it too became a victim of petty politics. These two reforms could have been the game changers in ease of doing business.

Image Souce- The Hindu

Many critics claim that in spite of increase in FDI, the growth in jobs is nominal. The claim doesn’t stand null and void as the job creation in the last quarter of FY 2015-16 has been quite low. The firewalls build by India has made us withstand the economic turmoil that exist in the world today. The figures of IIP (Index of Industrial Production) has send mixed signals. Core sector industries have to perform continuously well to attract investors to set up other manufacturing industries. ‘Make In India’ will show results if the process of reforms continue, rural economy strengthens, core sectors industries perform well, process of skilling the youth goes on and infrastructure improvement doesn’t impede. Though ‘Make In India’ scheme has been partially successful in defense manufacturing and electronic items manufacturing, it has to improve more . Bulk investment,like setting up of a mobile manufacturing unit by Apple or a fighter aircraft manufacturing unit by Boeing, in this two sectors are still awaited. ‘Make In India’, if successful can become the pillar of economic transformation in India. It will ensure jobs for our youth, boost exports and make India the centre of global trade and investment.